Outsourcing trends drive innovative contracts and tough negotiations

June 14, 2013

ISG recently released a brief report on 2012 trends in outsourcing. They comment upon the divergence between markets, which inevitably reflect the variations in economic conditions and business confidence.

In Europe, much of the focus appears to be on cost-cutting, with pressure for utility pricing, limited commitments and short-term returns. Asia is also experiencing anxiety over costs and flexibility, as they deal with a rapid slow-down in local markets and regional growth predictions. This has apparently led to ‘innovative contracting’, with a trend towards ‘assured outcomes’ and strong focus on IT outsourcing.

This leaves the US as a market that continues to cut back on its use of outsourcing and shows far more interest in innovation and transformation. This perhaps reflects the growing confidence of US business that it can effectively compete with new global competitors. This has lessened the need for labor arbitrage in previously low-cost markets and increased the pressure to develop new products, services and business process.

For providers, market conditions remain tough, with significant competition and the need to manage the complexity of divergent markets. However, as the report indicates, there is a growing ability to differentiate not only in terms of the services offered, but also in the range of contract structures and commercial offerings.